chapter 8-putting it together, climate change as a risk ... · putting it together: climate change...

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8

Putting it Together: Climate change as

a risk management problem

This chapter tackles the key question of how we can combine mitigation and

adaptation to minimise the risks and damages from climate change. It is clear that both are necessary, and the more mitigation we do the less adaptation is needed – but, equally, the more we adapt the less mitigation is needed. So how

do we best balance our efforts within a resource-constrained world? This chapter presents three approaches to answering this question, focusing on key vulnerabilities, inertia and timing constraints, and economic cost–benefit analysis. All three approaches suggest that significant and early mitigation action

is warranted, but none can give us a precise answer because all involve value judgements that cannot be delivered by scientific inquiry alone. We also see that there are systematic differences between different regions of the world.

The chapter draws virtually all its material from the Fourth Assessment Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC), particularly the

Working Group II and III Reports (WGII chapters 18–20 and WGIII chapters 2, 3, and 13), and the Synthesis Report (SYR Topic 5),49 and includes pointers to recent discussions in the scientific literature. However, the IPCC assessment does not

directly answer the overarching question: ‘what can different scientific approaches tell us about how much mitigation is needed and how quickly’ to avoid being seen as policy-prescriptive. Nonetheless, the question of what science can tell us about how urgent mitigation is and how we should balance adaptation and mitigation to

achieve a globally optimal outcome is central to the climate change debate. In this chapter I, therefore, depart from the IPCC assessment, not in terms of scientific content, but by posing this question more directly and presenting the scientific information that can help us answer it.

Chapter contents

8.1 Framing the problem ...............................................................................................228

8.1.1 ‘Managing the unavoidable, avoiding the unmanageable’ ............................228

8.1.2 Decision-making frameworks and approaches..............................................229

8.2 Key vulnerabilities....................................................................................................231

8.2.1 Summarising key vulnerabilities into five reasons for concern.....................232

Risks to unique and threatened systems ........................................................232

Risks of extreme weather events ...................................................................232

Distribution of impacts and vulnerabilities ...................................................233

Aggregate impacts .........................................................................................233

Risks of large-scale singularities ...................................................................233

8.2.2 Implications of key vulnerabilities for mitigation and decision-making.......234

49 AR4 comprises four volumes: the Working Group I, II, and III Reports (IPCC, 2007a (WGI), 2007b

(WGII), 2007c (WGIII)) and the Synthesis Report (IPCC, 2007d (SYR)). Each report has a

Summary for Policymakers (SPM), and each Working Group report has a Technical Summary (TS).

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8.3 Timescales and pathways for mitigation to achieve a stable climate...................236

8.3.1 Inertia in the climate system..........................................................................236

8.3.2 Inertia in socioeconomic systems ..................................................................237

8.3.3 Near-term investments in the global energy system......................................238

8.3.4 Reaching for the escape hatch – geo-engineering .........................................240

8.4 Cost–benefit perspective – costs of mitigation and avoided damages..................242

8.4.1 Estimating the global aggregate costs of climate change ..............................242

8.4.2 Finding the economic optimum of mitigation, impacts, and adaptation .......247

8.4.3 Caveats related to global cost–benefit analyses.............................................248

8.5 Regional and country-specific differences..............................................................249

8.5.1 Different perceptions of vulnerability, equity, and attitudes to risk ..............250

8.5.2 Regional differences arising from the distribution of mitigation ..................251

Boxes in chapter

Box 8.1: Key vulnerabilities, temperature and concentration targets...................................235

Box 8.2: Assumptions and judgements in estimating the cost of climate change ................244

8.1 Framing the problem

8.1.1 ‘Managing the unavoidable, avoiding the unmanageable’

Let’s summarise the main messages from the last few chapters. Further climate change is unavoidable, both in the near and longer-term future, because temperatures and sea level will continue to rise for decades to centuries even if carbon dioxide equivalent (CO2-equivalent) concentrations are stabilised anywhere at or above today’s levels. Nonetheless, the amount of future emissions and level at which greenhouse gas concentrations are ultimately stabilised will make an important difference to the climate change the world will experience beyond the next few decades. Many centuries into the future, the difference between sea level rising by 1 m or 10 m could be determined by emissions choices made during the 21st century (see chapter 3).

Climate change will affect virtually all systems, sectors, and regions of the world. The higher the rate and magnitude of climate change, the greater the chance of some systems no longer being able to cope with the impacts, and the greater the risk of large-scale changes in the climate system. Adaptation is necessary to reduce the impacts of climate change, but there are barriers to its implementation and the scope of adaptation is limited for some impacts, regions, and sectors. Populations under multiple stresses, with weak governance systems and limited access to information and resources are typically the most vulnerable. Even successful adaptation can rarely avoid all damages and will itself incur costs, but we have very limited information about its costs and likely effectiveness (see chapters 4 and 5).

There is huge potential to reduce greenhouse gas emissions. Although this has little effect on warming over the next few decades, it could make a substantial difference in the longer term and reduce the rate and magnitude of climate change. Some of the mitigation options are available at low or no cost and have co-benefits, but reducing emissions significantly below baselines will require considerable additional effort across all sectors and regions. The development and implementation of new technologies and policies to support their implementation will impose costs

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on society, which may require significant adjustment of some sectors and economies (see chapters 6 and 7).

This summary makes it clear that both adaptation and mitigation are necessary. Neither can avoid all climate change impacts on its own; they need to work together. Adaptation and mitigation can also be characterised as being mutually supportive, in that mitigation can avoid some of those impacts that cannot be managed by adaptation, while adaptation can be used to manage those impacts that seem unavoidable by mitigation alone.

In other words, climate change policy overall needs to ‘manage the unavoidable, and avoid the unmanageable’. I cannot recall who coined this expression, but it is an elegant and concise way of summarising the situation we are in.

Unfortunately, the decision about how much adaptation is feasible and which impacts are simply unmanageable, and how quickly and by how much we need to reduce global greenhouse gas emissions to avoid unmanageable impacts is less straightforward. Different regions and sectors have very different perspectives on what impacts are manageable and significant and how much they care about impacts that happen elsewhere or only after their lifetime. Different people and countries place different values on near- and long-term economic, social and environmental costs and benefits associated with greenhouse gas emission reductions. Yet we have only one atmosphere that receives all our collective greenhouse gas emissions, and one global climate system that warms up and changes in response to those collective emissions.

So how do we best balance our global efforts between adaptation and mitigation? How much mitigation is necessary to keep global impacts and adaptation needs at a manageable level? At what level should we aim to stabilise greenhouse gas concentrations, and how quickly do we need to reduce emissions to get there? How do we know it’s worth the cost?

8.1.2 Decision-making frameworks and approaches

Answering these questions would be easier if we knew exactly how much the climate will change, precisely when and where impacts will occur, how well we can adapt to them, and how effective measures to reduce emissions will be. As it stands, we can identify robust trends and likely ranges of future global changes in climate and their impacts, but significant uncertainties remain about the possibility of very large-scale changes and some impacts, and the likely effectiveness and cost of adaptation and mitigation in the real world.

Given these uncertainties, a risk management framework is generally seen as the most appropriate way to deal with climate change. Risk is often defined as the product of the probability and consequence of an event. Risk management means that we need to consider not only the most likely scenario (or ‘best estimate’) of future climate change and its impacts, but also potential future outcomes that may be less likely but could be much more damaging if they turned out to be true. Having considered the total range of possible outcomes, we could then consider which risks we find unacceptable, what actions would avoid or at least reduce such risks, how costs of such actions compare with the damages we want to avoid, and how promptly we would have to start those actions to be effective.

Any risk management process will have to be iterative. We cannot expect to decide on the right policies now for the rest of the 21st century, but we can set some long-term goals, decide on near-term objectives that are consistent (or at least not


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inconsistent) with these goals, and revise at regular intervals those objectives and the policies to achieve them. (SYR 5.1)

One challenge for a risk management approach is that while many global changes in climate are increasingly well quantified, regional scale changes and impacts are often less well characterised and the impacts of climate change differ greatly between regions. This leaves scope for highly subjective and regionally varying interpretations of the future risks associated with global climate change. But not only that: societies and individuals vary widely in their attitudes to risk, how they value ecosystems or cultural values against economic costs, and how they view the rights of future generations or historical entitlements against the rights of the current generation. As a result, decisions on climate change that may appear as a perfectly rational way to deal with future risks to one group of people may appear dangerously misguided and irresponsible to another.

A scientific approach cannot entirely resolve these differences, since some of them represent value judgements that lie outside the scope of scientific inquiry.50 What a scientific approach can do, however, is clearly lay out the assumptions and considerations that go into a particular decision-making framework, and then apply this framework to reach its conclusions in a transparent way. (SYR 5.1, 5.2; WGII 19.1; WGIII 2.2, 2.3)

Three approaches have been given prominence in the recent assessment by the IPCC. One approach considers so-called key vulnerabilities and reasons for concern about climate change. A clear assessment of these concerns is intended to help people in making their own determination of what constitutes acceptable risks, what increases in temperatures might be deemed unacceptable, and hence what long-term concentration targets mitigation policies might aim for. The second approach focuses on the timescales and pathways over which we could actually stabilise greenhouse gas concentrations, and explores the extent to which near-term decisions on mitigation could keep open or foreclose opportunities to change course at a later date. (It’s no good saying that you want to keep your options open if your current actions essentially determine what you will or will not be able to achieve in the future.) The third approach looks at the economics of climate change and investigates ways to minimise the total costs from climate change by balancing the costs of mitigation against the costs of damages from climate change. (SYR 5.2, 5.3, 5.4, 5.7; WGII 19.1, 19.4, 20.6, 20.7; WGIII 2.4, 2.5, 3.5, 3.6)

None of these approaches is necessarily better than any other; rather they are complementary ways of dealing with an immensely challenging problem, and each has its own set of difficulties. The first two approaches are more consistent with a risk management approach, whereas the third (cost–benefit analysis) might be more appealing to those who think primarily in economic terms. However, as we will see, this approach struggles to deal adequately with the uncertainties and assumptions inherent in cost estimates.

Nonetheless, all three approaches conclude that it is economically, ethically, and practically justified to reduce global greenhouse gas emissions below the levels that would occur in the absence of climate change policies. But none of these approaches can tell us exactly how quickly and by how much we should reduce our emissions,

50 For example, if somebody says to you ‘I do not actually care about your grandchildren’, that

might make them an unpleasant neighbour, but it is hard to prove such a person scientifically

wrong. And if you try very hard to prove them wrong, you might become an unpleasant

neighbour, too.


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because such specific answers depend on subjective value judgements. The best we can do is to inform such judgements from a scientific perspective and allow a rational debate about their implications.

8.2 Key vulnerabilities

The first approach focuses on the main ‘reasons for concern’ that one might have about climate change. Describing those reasons could allow us to identify the levels of climate change and associated impacts that might be deemed unacceptable, and where adaptation cannot sufficiently reduce the resulting damages. (WGII 19.1)

This approach does not assume that everybody will agree on what is or is not acceptable – but we can at least lay out a reasonably transparent framework about what sort of impacts might warrant particular concern (which is why they are also called ‘key vulnerabilities’), and at what level of temperature increases these impacts could potentially become significant. People could then use a summary of key vulnerabilities to discuss possible long-term targets for climate change and greenhouse gas concentrations that would reduce the risk of such concerns becoming realities. (WGII 19.1, 19.2, 19.4)

This approach also does not assume that one can find a single, scientifically justified, optimal global balance between the costs of mitigation and damages from climate change. Damages are distributed very differently around the globe compared with where most of the emissions come from or where the largest potential to reduce emissions exists.51 In addition, not all damages can be expressed in monetary terms. Balancing concerns about climate change impacts and economic costs of mitigation on a global scale is a political and sociocultural process. This approach takes the position that we cannot (and should not) pretend there is an objective scientific method that can determine what is best for the planet as a whole. (WGII 19.1, 19.4, 20.6)

Key vulnerabilities could be associated with many climate-sensitive systems discussed in chapters 3 and 4, including food supply, infrastructure, health, water resources, coastal systems, ecosystems, global bio-geochemical cycles, ice sheets, and modes of oceanic and atmospheric circulation. Which of the projected potential changes in these systems might be considered as ‘key vulnerabilities’ can be identified based on several criteria. The criteria used in the scientific literature include the magnitude of the impact (how many people are affected, its cost, the size of an ecosystem), its timing (does it occur in the near future or later), its persistence (would it be reversible at some later stage), the potential for adaptation, distributional aspects (who is most affected by this impact), its likelihood (do we know it will happen, or is it something that might happen), and finally the ‘importance’ of the impact (we tend to attach more value to some things and species than others, even if there is not necessarily a scientific basis for doing so). (WGII 19.1, 19.2; SYR 5.2)

This list of criteria does not provide a framework where one can objectively decide what is or is not a key vulnerability. There is no single metric that would allow one to rank the most important key vulnerabilities or that even describes their diversity. But at least such a framework provides an open and transparent basis for a

51 If you live in the small Pacific island nation of Tuvalu, you will probably feel very differently

about the prospect of even half a metre sea-level rise compared with somebody living in the

highlands of the Andes. On the other hand, not many Tuvaluans might feel personally aggrieved

if some South American glaciers disappear. And if you think that glaciers are where you go heli-

skiing and the Pacific is a place where you go surfing during your summer holiday, you might

struggle to fully appreciate the concerns that are felt at either place.


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conversation about why a person (or country) might consider some impacts and vulnerabilities as ‘key’ from their perspective and accordingly might want to avoid them by limiting the global temperature increase through reducing greenhouse gas emissions. (WGII 19.2; SYR 5.2)

8.2.1 Summarising key vulnerabilities into five reasons

for concern

The IPCC in its 2001 assessment had grouped key vulnerabilities into five main ‘reasons for concern’ about climate change. These are: the risk to unique and threatened systems (ecosystems and human populations), the risk from extreme weather events, the (uneven) distribution of impacts, the global aggregate impacts, and finally the risks of large-scale singularities (the ‘big’ or extraordinary events that would cause global-scale damage, such as loss of the Greenland ice sheet, or a shutdown of the Gulf stream).

In its 2007 assessment, the IPCC found that these reasons for concern are now stronger. Many risks are now identified with higher confidence, and some are projected to be larger or to occur at lower temperature increases than in the earlier assessment. In part, the increased reasons for concern are also due to the incorporation of the ability (or inability) to adapt to projected impacts. Some of the relevant key vulnerabilities described in the AR4 are discussed below. (WGII 19.3; SYR 5.2)

Risks to unique and threatened systems

The 2001 assessment found that some ecosystems would be threatened by climate change for almost any degree of warming. Recent observed changes give stronger evidence that this is the case, and that human populations (eg, mountain and polar communities) can also be affected. Studies have for the first time been able to quantify the risk of species extinction, estimating that 20–30% of all species assessed so far are at increasing risk of extinction if temperatures increase by more than 1.5–2.5°C above 1980–1999 levels. Confidence in this finding is not yet very high, but it is the first clear indication of the potential scale of impacts.

There is greater confidence that temperature increases of only 1–2°C above 1980–1999 levels pose significant risks to biodiversity hotspots. Corals are threatened by more frequent bleaching for temperature increases as little as 1°C, and could suffer extensive mortality if temperatures reach 3°C, unless we find a way to promote widespread acclimatisation or thermal adaptation of coral reefs. On the human side, Arctic, mountain, and small island communities are all projected to be increasingly vulnerable to warming. All these projections are now underpinned by a growing number of studies and actual observations. (SYR 5.2 and references therein)

Risks of extreme weather events

The 2001 assessment already identified that the risks from extreme events increase for even small amounts of warming. Scientific confidence has grown in projected further increases of droughts, heat waves, and flood risk with rising global average temperatures. We also have a growing number of studies and observations that show the consequences of such events (recalling that risk is the product of probability and consequence of an event) on food production, water supply, infrastructure, health, and ecosystems. The impacts of recent hurricanes and heat waves have provided evidence that not only developing but also developed countries are highly vulnerable to such extremes and that adaptation may not be effective in reducing associated damages. (SYR 5.2 and references therein)


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Distribution of impacts and vulnerabilities

The 2001 assessment found that small temperature increases would negatively affect some regions but be neutral or positive for others, while higher temperature increases would bring negative impacts for most regions. Further studies have provided additional evidence of the uneven distribution of vulnerabilities, and shown that those people, countries or regions in the weakest economic position are often the most vulnerable to climate change, especially when they also face other stresses. Even in developed countries there are particularly vulnerable population groups such as the poor and elderly, as evidenced by the impacts of Hurricane Katrina in 2005 and the European heat wave in 2003.

The greater regional and sectoral differentiation of climate change impacts has also benefited from the increased confidence with which regional patterns of climate change can now be identified. As a generalisation, low-latitude and less-developed areas generally face greater risk than others; one of the prime examples is Africa due to the combination of climate change impacts, multiple other stresses, and low capacity to adapt to those pressures. (WGII 19.3; SYR 5.2 and references therein)

Aggregate impacts

The 2001 assessment concluded that, for warming of 1–2°C, climate change around the world would deliver small economic benefits, but even at low levels of warming the majority of people would be negatively affected. This imbalance comes from the fact that a relatively small fraction of the world population generates a relatively large part of global incomes, and negative impacts are projected to be more severe in least developed countries. The IPCC assessment found that the economic benefits would disappear for warming above about 2–3ºC. Note that the assessment in 2001 focused only on direct economic impacts, was mostly based on studies for developed countries, and tended to neglect the impacts associated with changing extremes. (WGII 19.3)

Studies since the 2001 assessment suggest that the point where global benefits turn into losses could be reached at lower levels of warming, and any early benefits to the global economy might be smaller while damages for greater amounts of warming are likely to be larger. Perhaps more importantly, recent studies have also quantified aggregate impacts of climate change in terms other than money. For example, we now have more robust studies indicating that hundreds of millions of people are likely to be adversely affected by climate change over the next century through reduced water supplies and increased coastal flooding, malnutrition, and health impacts. (SYR 5.2 and references therein)

Risks of large-scale singularities

The 2001 assessment suggested that the risk of major events, such as the collapse of the Greenland or Antarctic ice sheet, or shutdown of the ocean circulation in the North Atlantic, was very low for warming of 1–2°C, but was increasing with the magnitude, rate, and duration of warming. The 2007 IPCC assessment confirmed that a large-scale and abrupt shutdown of the ocean circulation was very unlikely (ie, a probability of less than 10%) – though what this means in terms of risk (being probability times

consequence) is an open question. On the issue of sea-level rise, we now have greater confidence in the long-term consequences of thermal expansion of the oceans, which alone could raise sea levels by between one-half and several metres over many centuries. We have also become more acutely aware of processes that could lead to loss of ice from the Greenland and possibly Antarctic ice sheets on century rather than millennial timescales, such as acceleration of glacier flows, which are not incorporated


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in current model projections. As a consequence, we are less confident than we were in 2001 that low levels of warming pose only a small risk to the survival of the polar ice sheets – therefore, we cannot place an upper bound on sea-level rise even within the 21st century. (SYR 5.2 and references therein; see also the discussion of new literature since the AR4 contained in chapter 3, which further supports this conclusion)

8.2.2 Implications of key vulnerabilities for mitigation and

decision-making

So, how can we reduce the chances that the above concerns become realities? Of the key vulnerabilities listed above, all already assume that efforts would be made to adapt to the changes. We cannot be certain how effective adaptation might be – some regions might improve their ability to deal with the projected impacts more than we currently think, or they might become less vulnerable as society develops and becomes more wealthy. However, for many of the issues listed under the five reasons for concern, enhanced adaptation offers only limited additional hope. For example, large ecosystems such as the Arctic cannot be protected with financial investments; many of the deaths during the European heat wave occurred in affluent societies; and adapting to several metres of sea-level rise would come at enormous social and environmental as well as economic costs, even if it were feasible. Reducing the likelihood that temperatures or sea levels climb above certain levels in the first place, by way of reducing greenhouse gas emissions, would appear as a more reliable way of reducing those risks than hoping for adaptation to become more effective. (WGII 19.4; 20.7)

Unfortunately, even if we were to agree on which risks we find acceptable or unacceptable, we cannot derive a simple global temperature that would avoid the relevant risks, because different issues play out over different timescales and regions. For example, warming of 2°C could spell the end of a large number of species and permanent loss of indigenous cultures within a few decades, whereas the thermal expansion of the ocean and attendant sea-level rise takes many centuries to fully eventuate. Warming of 2ºC could be detrimental to agriculture in many developing countries but beneficial in northern high-latitude countries. In addition, the rate of warming also makes a difference: if temperatures climb by 2°C in the next 50 years it would impact much more on the most vulnerable regions than if it takes 100 years or longer. (WGII 19.4)

For these reasons, identifying key vulnerabilities and reasons for concern is not sufficient to pinpoint a specific temperature threshold below which climate change is ‘safe’ and above which it becomes ‘dangerous’ – it is only intended to support intelligent discussions about possible temperature targets and acceptable rates of change. In fact, the IPCC has diligently avoided suggesting any specific temperature target. Many scientists feel that the key vulnerabilities and reasons for concern speak for themselves, but they also understand that determining what is ‘dangerous’ will be the result of a political and societal discussion that will evolve over time (Smith et al, 2009). A large number of countries have stated that they consider 2°C warming above pre-industrial levels to be the limit of manageable climate change, and that greenhouse gas emissions should be limited to ensure the rise in temperatures does not exceed this level (see Box 8.1).


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Box 8.1: Key vulnerabilities, temperature and concentration targets

A range of environmental groups and the European Union (EU, 1996, 2005) have used assessments of key vulnerabilities to suggest that global average

temperatures should increase in the long term by no more than 2°C above pre-industrial levels (about 1.5° above 1980–1999 levels). A growing number of countries outside the EU have now agreed to this target, including the G8 group of industrialised countries and a significant number of developing countries, including China, India, and Brazil.52 Limiting warming to such a level

would not entirely avoid the key vulnerabilities listed above, but would help reduce some impacts and risks that are projected to affect large parts of the globe and large numbers of people. In other words, the target of 2ºC does not mean that staying below 2ºC will necessarily be ‘safe’, nor that going above 2ºC will necessarily be ‘dangerous’ for everybody to the same extent.53

Table 7.1 lists a range of possible stabilisation levels and best estimates of

their temperature implications. It shows that only the most stringent mitigation scenarios would have a chance of limiting long-term warming to 2ºC above pre-industrial levels, and a greenhouse gas concentration target of 450 parts per million (ppm) carbon dioxide equivalent (CO2-eq) is often seen as necessary to achieve this temperature goal.

However, even a target of 450 ppm CO2-eq, where global emissions peak by

2015 and decline by 50–80% below year 2000 levels by 2050, cannot guarantee that temperatures would remain below 2ºC. Risk management generally aims to avoid outcomes with a certain level of confidence. For example, modern nuclear reactors operate at a 99.999% or greater chance of avoiding a major accident (Hinds and Maslak 2006). By comparison, a

greenhouse gas concentration target of 450 ppm CO2-eq leaves a probability of about 50% that the actual long-term warming could turn out higher than 2ºC, due to the uncertainty in climate sensitivity. (WGII 19.4 and WGII Figure 19.1)

This shows that if we take a target of limiting warming to 2ºC seriously, then even stabilising at 450 ppm CO2-eq is actually a risky proposition. If we wanted to ensure that warming remains below 2ºC with greater probability, we would

need to limit greenhouse gas concentrations to levels even lower than 450 ppm. The key message is that no concentration target can guarantee warming to remain below a given limit, but lower concentrations increase the probability of staying below a given limit. The level at which we set a concentration target reflects our collective attitude to risk, and how highly we

value the systems that would be affected if temperatures were to exceed our given target after all.

We should also note that the lowest greenhouse gas concentration targets can only be reached via a temporary overshoot (see section 7.2.1). Framing a discussion about managing climate change risks only in terms of long-term stabilisation targets ignores shorter-term risks that may be associated with

such overshoots. Short-term issues would be particularly important where climate change impacts are irreversible even if the warming itself is only temporary, with species extinctions being a key example (O'Neill and Oppenheimer 2004; Schneider and Mastrandrea 2005). However, there are few

studies in the scientific literature that assess the consequences of overshoot scenarios. (WGII 19.4; WGIII 3.3, 3.5)

52 The G8 is a forum for eight of the world’s largest and most influential industrialised countries,

comprising Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, and United States.

53 For example, a warming of 2°C above pre-industrial levels is faint consolation if you are

concerned about the long-term survival of Pacific island nations. At 2ºC, some low-lying Pacific

islands could disappear from the map over centuries due to thermal expansion of the ocean alone.


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8.3 Timescales and pathways for mitigation to achieve a stable climate

The discussion above makes it clear that scientific analysis alone cannot come up with a conclusive long-term limit for a temperature increase, let alone greenhouse gas concentrations, that we should aim for. Nonetheless, the list of key vulnerabilities and reasons for concern suggests there are good economic, ethical, and environmental reasons to stabilise greenhouse gas concentrations at levels significantly below those that would be reached in the absence of dedicated efforts to reduce emissions.

We can now take a more practical perspective and ask: how does any temperature target translate into possible targets for greenhouse gas concentrations? And if we did agree on a target for greenhouse gas concentrations, how quickly would we have to start reducing emissions to maintain a reasonable chance of actually achieving such a target? What happens if we delay action and wait until we have more information about future climate change or better technology? To answer these questions, we have to consider the inertia in the climate as well as in socioeconomic systems. (SYR 5.3)

8.3.1 Inertia in the climate system

In chapter 3 we discussed in detail the inertia in the climate system. After greenhouse gas concentrations are stabilised, the rate of warming is expected to reduce within decades, but small increases in temperature could continue for several more centuries. Thermal expansion of the ocean would continue for many centuries for any of the stabilisation scenarios discussed in previous chapters, causing an eventual sea-level rise that could be much larger than estimated for the 21st century. The melting of glaciers, snow and small ice caps would add further to this rise. In addition, contributions to sea level from the loss of the Greenland ice sheet could be several metres over many centuries if temperatures are sustained in excess of 1.9–4.6°C above pre-industrial levels (about 1.4–4.1°C above 1980–1999 levels). (SYR 5.3)

This inertia in the climate system needs to be carefully considered in mitigation strategies. Some stabilisation targets for greenhouse gas concentrations might limit climate changes and their impacts to acceptable levels during the 21st century, but the inexorable, continuing rise of sea level over many more centuries might render potential long-term temperature or concentration targets unacceptable (to us, or to future generations). By comparison, if we place less emphasis on long-term consequences and discount events that might occur a long time into the future, or if we discount events that could have a very high impact but a lower (or simply unknown) probability (such as the accelerated disintegration of the Greenland or West Antarctic ice sheets from increased glacier flows), then a higher level of greenhouse gas concentrations might be deemed more acceptable. Either perspective would also need to account for the uneven distribution of the impacts of climate change across the world and hence differing regional perspectives. (WGIII 2.3, 2.6)

In either case, humans cannot directly control the concentrations of greenhouse gases, we can only control their emissions. CO2 concentrations will continue to increase as long as human emissions of CO2 are higher than its natural permanent removal processes in the global carbon cycle. To stabilise greenhouse gas concentrations at any level discussed so far, global emissions of CO2 would have to reach a peak and fall thereafter. Ultimately, CO2 emissions would have to fall to levels far below current emissions to stop greenhouse gas concentrations from continuing to increase. (WGIII 3.3; SYR 5.4)


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As a result of this inertia in the climate system and the global carbon cycle, emissions over the 21st century (potentially even just the next few decades) could determine the long-term consequences of climate change for many centuries to come. Figure 8.1 schematically illustrates those timescales. It shows that emissions reductions would have to occur well before any critical changes in the climate system have actually occurred. It is simply not an option to wait until we do not like the climate changes anymore and only then decide to take action, because greenhouse gas concentrations would continue to increase for a long time after emissions begin to fall; temperatures would continue to rise for at least another century, and sea level would continue to rise for many more centuries. (SYR 5.3)

Figure 8.1: Inertia in the climate system: from emissions to sea-level rise

Note: The figure illustrates timescales for changes in carbon dioxide (CO2) emissions and concentrations, temperature and sea-level rise from thermal expansion and melting of ice. Any concentration target ultimately requires CO2 emissions to fall to very low levels.

Source: Based on TAR SYR Figure SPM.5, updated with wording from WGI AR4.

8.3.2 Inertia in socioeconomic systems

The lower the level at which we want to stabilise greenhouse gas concentrations, the more quickly the peak and subsequent steady decline of greenhouse gas emissions would need to occur. The timing of the peak depends to some extent on how quickly it is socioeconomically possible, now or in future, to replace current greenhouse gas emitting processes with processes that have lower (or zero) rates of emission. (WGIII 3.3, 3.4)

Energy and urban infrastructure exhibit their own inertia. Much of the large-scale energy infrastructure, such as major power plants, has commercial lifetimes of three to five decades, while many houses are built to last decades up to a century. A power plant built today, designed to emit a certain rate of CO2 for every unit of energy it will generate, will continue to produce energy at this emissions rate until about 2050. Retrofitting power plants and houses is generally more expensive than implementing the best possible technologies at the design and building stage and has to overcome greater resistance to change and market failures. The energy needs implied in urban design, with its reliance on certain transport systems and distribution of energy, are


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even harder to change once they have become a ‘concrete’ reality and have lifetimes of a century or more. (WGIII 3.3, 3.6, 4.4, 6.8)

This means decisions taken over the next decade or two on which types of power plants are built, what housing design standards are applied, and what broad-scale decisions are made about development of urban areas and their infrastructure will affect emissions for many decades to come. Mitigation actions in the near term that ensure implementation of the best available low-carbon technologies and designs would avoid locking in long-lived carbon-intensive infrastructure and development pathways. Conversely, delaying such choices risks creating a large stock of investment that would make later, more rapid changes towards lower emissions or energy demands more costly, even if by then new technologies are cheaply available, because it could require the premature retirement of existing power plants or the wholesale replacement of urban infrastructure and urban form. (SYR 5.3; WGIII 2.3, 3.4, 3.5, 3.6)

Delaying mitigation action could have significant implications on the rate at which global greenhouse gas emissions would have to drop afterwards. If we use a target concentration level of 450 ppm CO2-eq as an example, global emissions have to peak between now and in 2025 and then fall to almost (or even below) zero by 2100. The timing of the emissions peak determines the rate at which global emissions would subsequently have to decline (see Figure 8.2). If the peak occurs by 2015, emissions would have to decline by about 1.8% globally every year until 2050 and beyond. If the peak occurs only in 2025, emissions would have to decline by as much as 5% globally every year to reach the same ultimate concentration level.

By comparison, the turn-over rate of large capital investment stock in the energy sector is around 1–3% per year. Reducing global emissions by 1.8% every year may (only just) be feasible if a new low- or zero-emissions power plant is built whenever an old power plant is decommissioned. However, reducing global emissions by 5% every year would require the replacement of existing infrastructure well before the end of its commercial lifetime. This analysis suggests that a delay of just 10 years could make the lowest greenhouse gas concentration targets assessed by the IPCC much more expensive to reach, even if zero-emissions technology becomes readily and cheaply available at a later stage. (WGIII 3.4, 3.5, 3.6)

8.3.3 Near-term investments in the global energy system

The next few decades until about 2030 are particularly important because of the sheer size of the investment in the global energy system that is expected to occur. The International Energy Agency estimates that more than US$20 trillion (one trillion is a million millions) will be invested between 2005 and 2030 in energy plants and other infrastructure capital stock to fuel growing economies and replace existing power plants. If no policies are implemented to increase the investment in low-carbon technologies, the International Energy Agency projects that the additional energy investments will increase global CO2 emissions by about 45% in 2030 relative to 2006, with 97% of the increase occurring in developing countries outside the Organisation for Economic Co-operation and Development (OECD). (WGIII 4.1, 4.4, 11.6; IEA 2008b)


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Figure 8.2: Consequences of delay in emissions reductions for required

reduction rates in future decades

Note: The figure shows consequences of a delay in global emissions reductions for decarbonisation rates required in later decades, illustrated for a particular integrated assessment model for reaching a long-term stabilisation target of 450 ppm carbon dioxide equivalent (CO2-eq). All pathways result in the same stabilisation concentration by about 2100, but they differ in terms of the time when global emissions peak and the rate at which they decline thereafter. A later peaking date requires a more rapid subsequent decline (curve 3) than an early peak (curve 0).

Source: Figure from den Elzen and Meinshausen (2005).

The emissions characteristics of these immense and long-lived investments will effectively lock-in the global emissions pathway well beyond the middle of the 21st century. Initial estimates show that halting the projected growth in global energy-related CO2 emissions and returning them to 2005 levels by 2030 would require a large shift in the pattern of energy investments, but that the additional cost to achieve such a shift is estimated to range from negligible to a maximum of about 10% compared with the projected baseline investment of US$20 trillion. (WGIII 4.4, 11.6)

A risk management perspective suggests that we cannot decide now with any degree of certainty on the long-term concentration target that we should achieve, because our knowledge about climate change will continue to grow. But this does not mean, therefore, that mitigation should be delayed, because this may make it impossible to reach specific targets at the lower end of the range later. It is of course attractive to wait with mitigation until cheaper technological options become available, and perhaps additional information on climate change impacts can tell us more what concentration level we should aim for. However, if we wait too long for cheap solutions that are just around the corner, we could reach a situation where we would have to replace existing carbon-intensive infrastructure with new low-carbon technologies more rapidly than economically feasible, because emissions would have


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to drop almost instantly once we approach our long-term concentration target. The inertia in the energy system implies that, if large-scale mitigation actions are not taken at a global scale in the very near future, we may effectively foreclose all future options of reaching the lower end of concentration targets within the 21st century, even if we or future generations decided and agreed later that this would have been a good idea after all. In other words, not reducing emissions rapidly now is tantamount to saying that we in fact know and can decide now that we do not have to stabilise concentrations at 450 ppm. Based on the preceding discussion, few people would claim that this would be a defensible decision.

8.3.4 Reaching for the escape hatch – geo-engineering

Recognising that global mitigation efforts may not reduce emissions as quickly as necessary to prevent large-scale damages from climate change, geo-engineering has been promoted to complement mitigation efforts and prevent disruptive climate change. The term geo-engineering is usually applied to schemes that would modify the total amount of solar radiation the Earth receives (eg, by injecting aerosols into the stratosphere or placing giant sunscreens in space), or that would enhance the removal of CO2 from the atmosphere (eg, by fertilising the ocean and thus accelerating uptake of CO2 by plankton). Such approaches would alter the Earth’s energy balance on a large scale or change the geo-chemistry of the global carbon cycle and thus complement conventional mitigation approaches.

The IPCC assessment in 2007 found that geo-engineering schemes remained largely speculative and unproven, and have the risk of unknown side effects, as well as lacking reliable cost estimates (WGIII SPM). Since geo-engineering options are mentioned repeatedly and increasingly as possible (additional) solutions to limit climate change, I will go beyond the IPCC assessment and present a brief overview here of the most recent literature and debate related to geo-engineering. Combining geo-engineering with emission reductions is argued to provide a better chance of meeting long-term stabilisation targets at low costs by allowing a temporary overshoot of greenhouse gas concentrations (and so reduced mitigation costs) without the attendant climate risks (Pielke Jr 2009).

Several recent reviews (Boyd 2008; Robock 2008) have emphasised that while a variety of geo-engineering schemes have been proposed, many are purely hypothetical model experiments. Only a few have a small-scale experimental basis but may not be sufficient to evaluate their global and long-term feasibility. Two schemes that have received most attention and that have some experimental basis are the injection of sulphate aerosols into the stratosphere (Crutzen 2006) and ocean fertilisation (Buesseler et al, 2008). The experimental basis for aerosol injection is the observation that the eruption of Mt Pinatubo in 1992, which injected large amounts of sulphuric acid into the stratosphere, led to a measurable cooling of global average temperatures for two to three years following the eruption. With regard to ocean fertilisation, purposeful seeding of the Southern Ocean with iron has led to a measurable short-term bloom in phytoplankton, which thereby enhanced the uptake of CO2 from the atmosphere into the surface ocean (Boyd 2008).

However, proposals to use such schemes as a basis for large-scale and deliberate modification of the Earth’s climate and carbon cycle have also met with severe criticism, pointing to the potential for unintended side effects. For aerosol injections, these include the possible impact on regional precipitation patterns and additional ozone depletion, while for ocean fertilisation, they include the perturbation of bio-geochemical nutrient cycles and possible detrimental impacts on ocean productivity


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away from the fertilisation region due to nutrient depletion (Buesseler et al, 2008; Kiehl 2006; Kintisch 2007; Kintisch 2008; Robock et al, 2008; Tilmes et al, 2008).

Other proposed schemes have no experimental basis and are purely speculative at this stage. They include the launch of large reflective mirrors into space that would reduce the amount of sunlight the Earth receives, or the seeding of low-level clouds over the ocean that would increase the planetary albedo and thus reduce the amount of solar energy absorbed by the Earth. However, similar issues of potential side effects apply to these proposals, and their actual efficacy in cooling the Earth has not yet been tested, nor have their full costs been assessed. In particular, none of these schemes offers a remedy against the increasing acidification of the ocean resulting from continued CO2 emissions unless they are still coupled with stringent mitigation measures (Wigley 2006). It is also noteworthy that most geo-engineering schemes when first proposed promised a much greater efficacy than subsequent more detailed studies suggest. Apart from enthusiasm on the side of the proponents, this points to the need for a careful assessment of their interactions with other parts of the climate system, flow-on effects, and full costs before major efforts to test them on a larger scale would be warranted (Boyd 2008 and references therein).

A further area of geo-engineering concerns carbon capture and storage. This is a grey area that, if applied to the direct capture of emissions from power plants and underground storage in geological formations, is usually regarded as a ‘normal’ mitigation option. There are also proposals to suck CO2 out of the atmosphere by chemical processes, or to combine large-scale use of biomass with carbon capture and storage, which offers the possibility of taking large amounts of CO2 out of the atmosphere and putting it back underground. However, the scale necessary for such schemes (ie, the amount of land used in large-scale monoculture plantations) to make a global difference suggests they would also require very careful consideration regarding their environmental, social, and economic implications and resilience to environmental changes, rather than offering an obvious solution (Broecker 2007; Boyd 2008 and references therein; Marland and Obersteiner 2008; Pielke Jr 2009; Read 2008).

Some authors have also noted that the possibility of implementing geo-engineering schemes unilaterally (a single nation could decide that it wants to go ahead with a large-scale injection of sulphur aerosols because it believes this will offer it relief from recurrent heat waves or droughts) raises the prospect for significant geo-political tension. Regulation regarding the testing and evaluation of geo-engineering schemes would, therefore, appear to be an essential part of the ‘tool-box’ in responding to climate change (Victor 2008).

The most recent studies, in my opinion, do not change the basic assessment by the IPCC that geo-engineering options are largely speculative with unknown costs and side effects. Perhaps more importantly, as pointed out by others (eg, Kiehl 2006), it appears as utter arrogance to hope that we can geo-engineer our way out of the climate change problem. The emission of greenhouse gases itself is a prime example of geo-engineering that we are finding hard to control; we have little evidence that adding a further global-scale perturbation to the climate system would somehow provide a solution to the entire problem.

Nonetheless, the prospect of a continued rise in emissions and the potential realisation that major disruptive climate changes may appear on the horizon could make geo-engineering interventions necessary. Calls to better evaluate the feasibility of the proposed options, including their side effects and costs, therefore, seem eminently sensible to ensure they can be added to the climate change ‘tool-box’ and used if and when necessary in full consciousness of their effects and risks. Evaluation


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of geo-engineering schemes would also have to consider the ability to reverse them in case undesirable side effects emerge under a global-scale application (Boyd 2008; Robock 2008).

8.4 Cost–benefit perspective – costs of mitigation and

avoided damages

The approaches to risk management discussed so far have focused mainly on damages we might wish to avoid, and the timing and range of actions necessary to reach certain stabilisation levels and/or limit the amount of climate change. These approaches are designed to deal with uncertainty in that they iteratively evaluate the best course of action and try not to foreclose opportunities for later course corrections. The discussion of key vulnerabilities also allows consideration of regional differences: we could choose to decide acceptable limits to global warming on the basis of regional considerations, for example, the need to avoid unmanageable impacts on low-lying Pacific island states or to reduce the risk of species extinctions in particular biodiversity hotspots.

A cost–benefit approach takes a different perspective and asks the simple question: how do the global costs of mitigation actually compare with its climatic benefits? We may not like any of the damages from climate change, but mitigation, too, has its own costs (see chapter 7). There must come a point where the costs of mitigation would exceed the cost of the damages we are trying to avoid. How do we know when this point is reached? When is mitigation no longer a cost-effective means of avoiding damages?

We already have global cost estimates for mitigation from chapter 7, assuming global implementation of mitigation policies. If we can derive a comparable figure for the global cost of damages from climate change impacts, we should be able to compare those two global costs and decide on an optimal global course of action that minimises the total global costs of both mitigation and climate damages combined.

8.4.1 Estimating the global aggregate costs of climate change

Estimating the global costs resulting from climate change damages is not as simple as it sounds: climate change impacts come in all shapes and forms, and over a range of time-frames. In addition, adaptation can reduce some of those impacts, but it will itself bring costs and may foreclose other development opportunities. Climate change could also bring benefits in some regions and sectors. Aggregating all such impacts across the world into a single economic figure is, therefore, fraught with problems. Box 8.2 summarises key assumptions and decisions we have to make to develop aggregate cost estimates for the impacts of climate change. (WGII 18.4, 20.6)

Most of the earlier studies of the global cost of climate change impacts have expressed this cost as a percentage change of global gross domestic product (GDP). Such studies show a wide spread, displayed in Figure 8.3, which reflects in part uncertainties about the impacts, but to an even larger extent the range of assumptions that go into such estimates (see Box 8.2). All studies suggest that global costs would increase for higher levels of warming. Some studies indicate that there might be global economic benefits for low levels of warming, while others suggest increasing costs for any amount of warming. It is worth remembering that estimates of global cost do not necessarily reflect the number of people that will be negatively or positively affected by climate change. A small fraction of the global population produces a disproportionately large part of global GDP, so cost estimates tend to


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reflect the climate change effects on developed rather than developing countries. (WGII 18.4, 20.6)

Overall, studies estimate global GDP losses of about 1–5% of GDP for warming of 4°C above pre-industrial levels (see Figure 8.3). Losses are often estimated to be higher in developing countries, and estimates of global costs depend critically on the weighting applied to losses in different parts of the world that have very different levels of income and welfare. Studies that place a greater weight on losses in already poor regions derive larger global cost estimates than those that use a more neutral weighting. (WGII 20.6)

Figure 8.3: Impacts of climate change on global gross domestic (GDP) product

from different studies

Note: The figure shows impacts of climate change on global GDP as a function of global average temperature increases from different studies and different assumptions. The left-hand panel shows results from several different studies using various assumptions

regarding the weighting of economic impacts. The right-hand panel shows impacts estimated based on different assumptions within one single study.

Source: Based WGII Figure 20.3 (a) and (b) and references therein.

While estimates of total damages as a percentage of GDP can be helpful in reminding us that climate change imposes very real costs on society, they do not actually tell us what we want to know. These estimates show that climate change costs money no matter which way we look at it, either by reducing emissions or by coping with its impacts. But what we want to know from a cost–benefit perspective is what combination of mitigation, impacts, and adaptation would be the optimal use of our resources. Should we accept higher costs of mitigation because the costs of impacts and adaptation would decrease, or should we accept higher costs resulting from impacts and adaptation needs and keep the costs of mitigation low?54

More recent studies have focused on another quantity that can be readily compared with the costs of mitigation. This is the so-called Social Cost of Carbon (SCC). The SCC is defined as the economic cost of the additional damages that are caused by the emission of an additional tonne of carbon dioxide. In other words, the SCC tries to answer the question: how much damage do I do if I emit this tonne of carbon dioxide now?

54 Note this entire section assumes that it makes sense to speak of a collective ‘we’ that encompasses

the entire world. Experience shows that the distribution of global gains and losses from any

enterprise does not exactly resemble a happy family. We discuss at the end of this chapter, and in

chapter 10 in detail, the international and political dimension of this problem of international equity.

In this current discussion we assume it is possible, at least theoretically, to look at costs and benefits

in a global sense, and so there is something that ‘we’ might regard as a ‘globally optimal’ response.


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Estimates of the SCC add up all the impacts that an emission of one additional tonne of CO2 would cause for as long as CO2 remains in the atmosphere (which is, as we know, hundreds of years, and about 20% even for thousands of years). Such estimates cannot avoid the judgements that have to be made when calculating and aggregating economic costs of climate change, they are another way of adding up the costs integrated over time. But as we shall see, the results can be much more readily compared with the costs of emissions reductions. (WGII 20.6)

Box 8.2: Assumptions and judgements in estimating the cost of climate change

Estimating the costs of climate change impacts requires several important

judgements and assumptions to be made, both in the design of studies and

interpretation of their results. These assumptions can have a significant impact

on the total costs estimated (see discussion and references in WGII 18.4 and

20.6 for the issues listed below; also Anthoff et al, 2009; Tol 2005; Tol 2007).

Biophysical differences between studies used to estimate global-scale

impacts include the treatment of carbon fertilisation and the assumed impacts

on agriculture and forestry. Studies also make varying assumptions regarding

changes in extremes and their relevance for different sectors. All models are

simplifications of the real world so rely on generalisations about the impacts

and costs associated with a given amount of climate change in any world

region. Some studies derive their results from the outputs of one or two

climate models, whereas others use a larger ensemble of models to generate

the relevant patterns of climate change. Studies also differ with respect to the

treatment of adaptation. As we saw in chapter 5, adaptation can reduce

damages but cannot entirely avoid them, incurs costs and may cause other

opportunities to be lost. Global-scale assumptions regarding adaptation differ

widely between studies and are not always transparent.

Apart from these differences in the formulation of models, there are

important judgements about the interpretation of their results, including how

to aggregate impacts in different regions and sectors and over extended time

periods. The Intergovernmental Panel on Climate Change 2007 assessment

analysed the importance of different assumptions in models with regard to the

overall cost estimates, and found the following parameters were most

important (listed in order of importance).

Climate sensitivity: the amount of warming caused in the long term by a

given concentration of greenhouse gases is a key determinant for future

impacts. Since climate sensitivity can only be determined within a reasonably

wide bound, different assumptions about its value lead to different degrees of

damages for the emission of a given greenhouse gas.

Pure time preference rate: we generally care more about the present than

the future. This is captured in the ‘pure time preference’ rate, which economists

use to discount costs that only occur in the future compared with costs in the

present. This rate becomes critical for the costs of damages that occur only a

long time into the future; if we value the future less, then the apparent costs of

damages in the distant future are smaller than if we give the future as equal

weight as the present. There is a large body of literature discussing appropriate

choices for this discount rate in economic analysis. This is complicated by the

fact that it is also an ethical issue, because we are valuing costs that not we but

our grandchildren will have to bear, and they might well take a different view

regarding whether their environment and their lives are worth less than ours.


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Non-economic impacts: many impacts of climate change are not primarily

economic in nature; loss of ecosystems or the suffering caused by premature

deaths are examples. There are techniques to translate such non-economic

impacts into monetary terms, but they differ in their assumptions and results.

For example, using the willingness of people to pay for avoiding such impacts

(eg, the willingness to pay higher taxes to get better health services) is strongly

dependent on their wealth; as a consequence, willingness-to-pay studies find

that a human life in a rich developed country is ‘worth more’ than a human life in

a developing country – a result that leaves an obvious question mark about the

ethical foundation to apply such methods to non-economic impacts.

Equity weight: it seems obvious that one dollar is worth more for

somebody who earns $10,000 per year than for somebody who earns

$100,000 per year. This means that a loss corresponding to $1 in a poor

country should be counted more than a loss of $1 in a rich country. But how

much more? There are different ways of approaching this problem, which is

generally referred to as ‘equity weight’ because it determines how we balance

and aggregate monetary impacts that occur in rich and poor countries.

Climate change half life: the rate of climate change can be as important

as the absolute magnitude in determining impacts. Different models give

slightly different answers, and assumptions regarding this rate of change,

therefore, affect the estimated damages.

Economic impact: finally, all models have to translate biophysical impacts

into economic impacts. Differences in how this valuation is done between

different models obviously affect the overall cost for a given amount of warming.

The SCC avoids one issue, which is the limited time horizon of impacts

studies that focus only on gross domestic product (GDP) losses at a given point

in time. For example, if the world warms by 3°C and we only look ahead to

2100, we will see some damages, but it would be very unlikely to have resulted

in several metres of sea-level rise by 2100. If we look ahead to 2500 though,

we may well see several metres of sea-level rise for the same concentration of

greenhouse gases, simply because melting of ice sheets and thermal expansion

of the ocean continues. The SCC integrates the entire time horizon over which

carbon dioxide contributes to warming, so captures much more distant but

potentially very significant impacts, whereas a time-limited analysis (eg, of

GDP loss in 2100) could remain oblivious to the inevitable damages that would

occur in the distant future. The monetary weight accorded to such distant

large-scale impacts, however, is strongly affected by the choice of discount

rate and how we treat uncertain high-impact events, resulting in a large spread

of values for the SCC in the scientific literature.

Recent peer-reviewed estimates of the SCC (that is, the globally aggregated damages resulting from every additional tonne of CO2 that we emit) have an average value of US$12/tCO2, but the range from about 100 studies is large (from –$3/tCO2 to $95/tCO2). This considerable range reflects the large number of assumptions that have to be made to produce any such figure (see Box 8.2). One important conclusion from all studies though is that the SCC increases over time at a rate of about 2–3% per year. That is, continuing to emit more and more CO2 as time goes on causes ever more damage for each tonne – which is not much different from saying what we’ve said before, the damages of climate change increase with the rate and magnitude of the change. (WGII 20.6)


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Figure 8.4 shows the distribution of estimates of the SCC as assessed by the IPCC. It shows that a fair fraction of the studies are found around the mean value and about 10% of all studies show negative costs (ie, suggest that climate change, at least at current rates of emissions, would actually produce global economic benefits). At the same time, about 10% of the studies suggest very high costs in the order of US$100/tCO2, and there is a long ‘fat tail’ of studies that suggest costs could be significantly higher than the best estimate. Studies that give a negative SCC are characterised by high discount rates, low equity weights (ie, assuming that a dollar in a poor country is worth as much as a dollar in a rich country), and assume low climate sensitivity together with significant benefits from carbon fertilisation on agriculture. In contrast, those studies that give a very high SCC assume low discount rates, give higher equity weighting, and take into account damages from extreme events and the potential for future climate-related catastrophes (such as the rapid disintegration of the Greenland ice sheet and high climate sensitivity). (WGII 20.6)

This asymmetrical distribution of results suggests that it would be highly simplistic to rely on only a single mean or median value of the SCC, but that the full range of potential costs has to be considered in any risk management decisions.55

A recent update to this analysis confirms the wide spread of the SCC. In particular, it emphasises the possibility for very high values for the SCC if one assumes lower discount rates for climate change impacts that occur in the distant future and places a high value on social costs and risks and gives greater weight to global equity between rich and poor regions (Tol 2007).

Figure 8.4: Distribution of estimates of the Social Cost of Carbon for the integrated damages from greenhouse gas emissions

Note: The figure shows the distribution of estimates for the Social Cost of Carbon from 100 studies. The black line is for studies ranked according to basic quality criteria, the dark grey line is for studies that have undergone peer review. The light grey line is for all studies using values as reported by the authors. The mean of peer-reviewed studies is US$12/tCO2.

Source: Figure from Tol (2005).

55 Fundamentally, it shows how crucial it is never to rely on one single study or mean value in any

area of research that incorporates a large number of social and ethical judgements as well as

technical assumptions in its conclusions.


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Given all the assumptions that have to enter any globally aggregate estimate of the cost of climate change, some general conclusions can be made. The first is that global aggregate estimates hide the enormous diversity of impacts and impacted populations. In some regions and in some groups of people, the climate change damage costs could be much higher than the global average value – while others may derive benefits. We need to be very careful about how such a globally aggregate figure is used and should not automatically assume that the figure reflects everybody’s ‘average’ interest. The second key warning is that economic valuations are likely to underestimate, or at least under-represent, the true damage because they cannot include (or have not included) many non-quantifiable impacts, such as the value of non-commercial species, cultural identity, and not least the question of how to value human lives and well-being. (WGII 20.6)

8.4.2 Finding the economic optimum of mitigation, impacts,

and adaptation

Putting such warnings aside for the moment, what can the SCC tell us about what an economically optimal combination of mitigation and impacts/adaptation could look like? To answer this we need to make a brief excursion into economic theory.

Our task, we assume, is to minimise the total costs of mitigation, adaptation, and whatever residual impacts we cannot adapt to but just have to cope with. The costs of mitigation increase the more we reduce greenhouse gas emissions, while the costs of climate change impacts and adaptation increase the more we increase greenhouse gas emissions. Economic theory tells us that the total costs are minimal when the so-called marginal cost of mitigation is identical to the marginal damage cost from emissions. The marginal cost of reducing emissions is the price of carbon required to achieve emission reductions, which we discussed in chapter 7. The marginal damage cost is, in practical terms, the Social Cost of Carbon. Figure 8.5 illustrates this relationship between total and marginal costs. (WGIII 3.5)

Economic theory states that the total costs to society from climate change would be minimised if the effective price of carbon that we apply to reduce greenhouse gas emissions equals the SCC. (WGIII 3.5)

So how do these costs stack up? The average SCC in 2005 prices was US$12/tCO2, but with a very large range, in particular a long ‘tail’ towards higher costs. For mitigation, chapter 7 showed that carbon prices in the order of US$20–80/tCO2-eq by 2030 were consistent with the stabilisation of greenhouse gas concentrations around 550 ppm CO2-eq in the long term, and higher costs (US$30–120/tCO2-eq) to stabilise between 450 and 550 ppm CO2-eq. Taking into account that the SCC increases over time (at a few percent per year), and that the SCC excludes damages that cannot be expressed in economic terms, we see that the SCC in 2030 would be broadly comparable with the costs of mitigation (ie, the price of carbon) in such stabilisation scenarios. (WGIII 3.5)

This conclusion tells us it is economically efficient to aim to stabilise greenhouse gas concentrations in the atmosphere at the range of levels considered so far and to place a price on carbon within the (very broad) ranges discussed in chapters 6 and 7. It also tells us it is economically efficient to impose some costs on the economy to achieve this, because it avoids larger costs to society if emissions continue unchecked.


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Figure 8.5: Relationship between costs of mitigation and climate change

damages, and total costs

Note: The figure illustrates the absolute and marginal costs of mitigation and aggregate damages from climate change. The economically optimal level of mitigation would be reached when the total cost is at its minimum, that is, when the price of carbon (ie, the

cost imposed on each additional tonne of CO2 emitted) is equal to the additional damage caused by this additional emission.

8.4.3 Caveats related to global cost–benefit analyses

While this sounds like a significant finding, we have to be clear (and the IPCC was very clear) that we cannot, at this stage and on the basis of such a preliminary analysis, unambiguously determine what specific price of carbon would be economically optimal as a risk management strategy. There are several reasons why we cannot go further than a general statement and derive a specific long-term temperature target or stabilisation concentration for greenhouse gases from such an economic analysis. (WGIII 3.5; SYR 5.7)

The first is the very large range of estimates for the SCC as well as for the price of carbon necessary to stabilise greenhouse gas concentrations at any given level. The large spread of values is to a large extent due to subjective assumptions (such as discount rates and equity weighting), but also assumptions about how perfectly global mitigation policies could be implemented and how their costs are defined and measured (see section 6.3.1 and Box 7.2). We cannot compare such large ranges and claim to derive a single scientifically objective optimal pathway from those estimates. (WGII 20.6; WGIII 3.5; SYR 5.7)

The second is that, from a risk management perspective, we cannot operate only on the basis of best estimates but have to consider the range of costs. If some of the physical parameters used to estimate the SCC, such as the equilibrium climate sensitivity, turn out to be high, then more rapid and stringent mitigation would be economically justified. If it turns out to be low, then mitigation could proceed at a slower pace. The mitigation pathway we choose will, therefore, depend on our attitude to risk (ie, the ‘fat tails’ in the range of cost estimates), and how much we


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value certainty about mitigation costs in the near term against uncertainty about climate change damages in the longer term. (WGII 20.6, 20.9; WGIII 3.5)

The third is that the SCC (ie, the damages from a tonne of CO2 emitted today) also depends on future emissions. If we decide to reduce future emissions, the SCC would also fall; so a much more sophisticated analysis under a range of different mitigation scenarios would be necessary to derive the economically optimal path. However, the uncertainties and assumptions embedded in estimates of the SCC would leave little value in such a sophisticated analysis. (WGII 20.6)

Finally, comparing the costs of mitigation with damage costs requires us to compare costs that are borne by different people living in different places and even at different times: most mitigation would have to be done in developed and rapidly developing countries and would have to start in the very near future, while many of the damages from climate change would be borne by future generations and will fall disproportionately on the poorest and least developed regions. What appears as a globally optimal cost–benefit equation may, therefore, not satisfy anybody in particular; somebody will always think they are paying too much, while others will feel they are left with an unfair amount of damages and costs.56 (WGII 18.1, 18.4; WGII 20.6; WGIII 3.5; SYR 5.7)

In summary, comparing the costs of mitigation and its benefits in terms of avoided damages from climate change suggests it is economically beneficial to impose a cost on carbon emissions and to stabilise greenhouse gas concentrations. But this analysis cannot give us a precise level at which we should stabilise concentrations. It is seriously hampered by a wide range of assumptions that studies on the damage costs of climate change have to make, and it struggles to deal with the uncertainties inherent in such cost–benefit comparisons. Finding a globally optimal solution will, therefore, inevitably have to take account of other interests, social values, and political processes, including judgements of what is fair and equitable.

International climate change negotiations attempt to tackle exactly this problem of international and intergenerational equity. Cost–benefit analyses such as the one discussed in this chapter form a valuable input for such negotiations, and to establish scientific boundaries for such debates, but addressing the concerns and specific needs of diverse populations inevitably requires more than aggregate economic analysis.

8.5 Regional and country-specific differences

All approaches discussed here agree that it makes economic, social, and environmental sense to reduce greenhouse gas emissions. But the optimal level of mitigation cannot be decided by the scientific criteria alone used in these approaches, because what we view as an ‘optimal’ response depends on how we weigh different aspects and criteria. The approaches discussed in this paper cover only a part of the wide range of scientific literature that places different weightings on those different criteria. An even wider range of public and political opinions is usually expressed on where the optimum balance between mitigation and adaptation lies, and what long-

56 In other words, you may well be right that a global cost–benefit analysis can determine the

pathway that is best for everybody, but you may also find that everybody hates you for it.

Although there are contests for this title, nobody is truly ‘Mr or Miss World’ such that they

incorporate all current and future global costs and benefits related to climate change into a single

person, country, or region. And if only half the people hate you and the other half love you for

your cost–benefit analysis, you probably got it wrong anyway.


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term targets for temperature increases and greenhouse gas concentrations might constitute acceptable or unacceptable risks.

To conclude, I would like to look more closely at how regional, national, and individual perspectives might influence the global perspective that we have taken so far in this analysis of achieving an optimal balance between mitigation and adaptation.

8.5.1 Different perceptions of vulnerability, equity, and

attitudes to risk

Describing the damages from climate change with a single global cost figure is fraught with difficulties because such a figure hides the enormous diversity of impacts and vulnerabilities. A country with a natural resource base that would be destroyed by climate change is not helped by the fact that another country might be better off from climate change. Considerations of equity, fairness, compensation, and how to weigh up positive and negative impacts across regions, therefore, lie at the heart of any evaluation of climate change. (WGII 19.4, 20.5, 20.6, 20.9; WGIII 2.6; SYR 5.1, 5.7)

Regions and countries that are, or perceive themselves to be, less vulnerable than others to the impacts of climate change might view the optimal balance between adaptation and mitigation more on the side of adaptation. However, this perspective could be modified by two additional considerations. One is practical. Major impacts of climate change on one region of the world will likely have repercussions on other regions through trade, forced migration, aid requirements, and last but possibly not least, conflict. The scientific literature is very sparse on assessing the relevance of these issues, and is itself riddled with assumptions. The lack of reliable studies has been noted by the recent IPCC assessment (WGII 11.8, 14.8). Most available studies agree that flow-on effects of climate change impacts could be significant, especially for countries that rely heavily on tourism or trade or could be vulnerable to conflict and security issues. As a result, it may be in the self-interest even of countries that are less vulnerable to the direct impacts of climate change to consider the most vulnerable regions when they determine desirable global mitigation targets.

A second consideration that could influence the desirable level of mitigation comes from basic ethics. Even if a country is not directly or even indirectly affected by climate change impacts as much as others, it may choose to take the impacts on more vulnerable regions into account simply on the basis of global human rights. Given that the atmosphere and climate is a global commons, countries cannot individually choose the climate they wish to have. The level of global mitigation affects all countries. From this perspective, it is not a scientific matter whether we have regard for fundamental human rights on a global level but a question of ethics. If we choose to take such ethical considerations into account, then mitigation targets will have to be lower than if we do not, because they will need to be influenced by the levels that are necessary to limit damages to the most vulnerable regions of the world (see also Burson 2008; Kengmana 2008 and references therein).

In addition, the desirable level and urgency of emissions reductions is strongly influenced by how much we want to avoid potentially catastrophic but uncertain impacts, or whether we focus only on the better-known impacts. The latter approach would imply a high risk tolerance and would generally lead to less mitigation than a high degree of risk aversion and concern for future generations. Countries that are in the stages of rapid social and economic development may be prepared to take greater risks (ie, give less weight to the future and to uncertain but potentially catastrophic


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outcomes) than countries that are in a relatively stable and comfortable position and thus more interested in retaining the status quo.57

With the exception of the flow-on effects of climate change impacts, most of these issues cannot be resolved by scientific research alone but reflect fundamental human choices – how we account for diversity and the impacts on the most vulnerable people, and how much we care about future generations. These choices ensure that discussions about acceptable greenhouse gas stabilisation levels involve a political as well as scientific process that has to balance the different concerns held by different people and countries about climate change. (WGII 19.4, 20.7; WGIII 2.2, 2.3, 2.6)

8.5.2 Regional differences arising from the distribution of

mitigation

The uneven distribution of the costs of mitigation creates an additional reason for differing views on the desirable level and urgency of mitigation. Climate change impacts are determined by global greenhouse gas concentrations, which are the result of global collective emissions. However, reductions in global emissions could be achieved (within limits) either by very stringent action by only a subset of countries or by less stringent action shared by all countries.

Comparing the costs of mitigation with avoided damages is challenging not only because it has to cater for different interpretations of the severity of impacts and risks on a regional basis, but also because there are various choices for sharing the task of mitigation. Views on the appropriate level of global mitigation, therefore, depend on how the costs of mitigation are distributed between regions and countries, and thus how the balance between mitigation and adaptation would play out at the individual country level. (WGIII 2.5, 2.6)

It is generally accepted (and indeed enshrined in the United Nations Framework Convention on Climate Change; see chapter 10) that developed countries have to take the lead in reducing greenhouse gas emissions because they have generated most emissions to date. They also have the largest technological and financial capacity to develop, implement, and disseminate solutions to reduce emissions. Moreover, developing countries have a natural right to achieve and aspire to standards of living that are normal in developed countries. This requires continued economic growth and, to date, has also been associated with increased demand for energy and greenhouse gas emissions. Thus, it is generally considered a key element of global equity in climate change discussions that a larger part of the costs of mitigation would need to be borne by developed countries, and the smallest cost by the least developed countries that have contributed least to global greenhouse gas

57 It is worth emphasising that use of the word ‘risk’ can be applied to situations where the occurrence

of a specific event is highly uncertain, but also to situations where we can be quite certain it will

occur. An example of the former is the statement ‘there is a risk that your house will get burgled

while you are on holiday’. In this case, we do not determine the premium we are individually

prepared pay on the basis that we expect to get burgled once every three years, but rather by our

desire to be protected against the worst if it happens. In contrast, paying health insurance to receive

prompt treatment when necessary is an example of a highly certain outcome that varies only in

terms of when it occurs, and how much we will be affected by individual events. The concept of risk

management in the context of climate change encompasses both situations, where we need to

respond to impacts that are fairly certain (such as long-term sea-level rise from thermal expansion

alone) and those that are less certain but potentially catastrophic (such as accelerated melting of the

Greenland ice sheet and consequent more rapid and larger sea-level rise of several metres).


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emissions but are most vulnerable to, and likely to be most affected by, the impacts of climate change. (WGIII 2.5, 2.6, 13.3)

This balancing of equity concerns can to some extent be addressed by a political process and is open to negotiation. But the lower the level at which we want to stabilise greenhouse gas concentrations, the more the physical constraints of the climate system itself become important. To achieve low stabilisation targets between 450 and 550 ppm CO2-eq, it is not sufficient if developed countries alone reduce their emissions. Even if developed country emissions dropped to zero by 2050, the growth of emissions from developing countries would still be sufficient to push greenhouse gas concentrations well above 550 ppm CO2-eq. The lower the concentration target, the more and the sooner developing countries would also need to reduce their emissions, or at least limit the growth in their emissions.

This becomes a particularly pressing challenge for large developing countries with economies that are undergoing rapid growth and result in globally significant greenhouse gas emissions (such as China), but whose per-capita and historical emissions, as well as income levels, are still much lower than the average developed country. We discuss in chapter 10 some of the approaches proposed to share emissions reductions between different countries, and how to achieve an overall process that is seen as fair and equitable despite those country-specific different perspectives.

The value judgements that determine such outcomes will change over time as the socioeconomic circumstances of countries change, and with them their weighting of risk, equity, and the balance of economic, social, and environmental interests. This change over time is a key reason why it is not possible to determine an optimal course for climate policy for the 21st century, but will have to involve an iterative process that takes account of growing information as well as changing societal preferences. Unfortunately, these changing circumstances add yet another layer of complexity and potential for delay to the design of the most appropriate portfolio of climate change policies at national and global levels.

chapter 8-putting it together, climate change as a risk ... · putting it together: climate change...

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